Public Bill Committee

[Mr. Eric Illsley in the Chair]

Clause 135

Requirement for construction contracts to be in writing

Question (this day) again proposed, That the clause stand part of the Bill.

Stewart Jackson: We may have lift problems again, given the depleted number of Labour Members; however, we are not going to divide for the time being.
I was making mention this morning of the right hon. Member for Greenwich and Woolwich because a rather mischievous suggestion was made that he might want to make a comeback in his role as Minister of State at the then Office of the Deputy Prime Minister. I have heard of worse ideas. If I may pay him a compliment, in my role as shadow fire service Minister, rarely do I meet anyone in the fire service who has not got a good word to say about him as a former fire service Minister. If the Government Whips are taking any notice of what I say, they might consider my suggestionbut that has probably ruined his career.
Turning to clause 135, this morning I was making the case that had been put very strongly by the Construction Confederation, but it might be as well to put it into a wider context. The Opposition believe that the Housing Grants, Construction and Regeneration Act 1996 needs updating to tackle the continuing problem of late and unreasonably disputed payments in the sector. We believe in the decision to legislate, and support strengthening the adjudication system. We consistently lobbied for that with the last three construction Ministers. We support the aims of the clauses on payment, and we hope that the Minister takes on board the significant amount of lobbying that the construction industry has put in place.
I am anxious not to stray outside the remit of the clause, but I was obviously disappointed that the amendment proposed by the Federation of Master Builders was not selected. We may have been minded to support that provision, which amended the 1996 Act and dealt with the desirability of maintaining a diverse range of contractors in a local authority area. We are sorry it was not on the selection list.
The Government had an opportunity, in drafting the clause, to take cognisance of the pleas being made in the industry to roll up all the adjudication under the auspices of the scheme for construction contracts. As a result, there would have been no need for this strict definitionthe division between written and oral contractswhich, as I said earlier, may well give rise to unnecessary bureaucracy and time-wasting and impose an indicative cost on the construction industry. However, I look forward to hearing from the Exchequer Secretary to the Treasury, the hon. Member for Portsmouth, North. I paid her a compliment this morning, Mr. Illsley, and congratulated her on her promotion. She is in fact on double time this afternoon, we gather, because she is simultaneously serving on the Finance Bill and this Bill.

Daniel Rogerson: Following on from the hon. Gentlemans remarks, I suppose the Exchequer Secretary is fortunate that the rules change on 1 July, so she will not have to declare that she is doing two jobs at once. I am not sure what the salary implications are, but I am sure there are some.
I should note that this is an odd Bill, in that it puts together lots of different unrelated elements. I suppose that that is a feature of where we are in this Sessiontrying to get things done before we finish for the summer. It also shows that the Bill has not focused on issues of local democratic involvement, which we had hoped it might when the White Paper was introduced. Having said that, this is obviously a crucial issue for people in the construction sector. Members of the Committee have received a great deal of information from individual businesses and representative organisations about those concerns. We will not have the opportunity to talk about those as we move through this part of the Bill. However, it seems that there is concern that the proposed changes will not meet the needs of the sector in these difficult economic times. We will need to return to that as we move through the clauses in this part of the Bill.

Nick Raynsford: On Second Reading, I drew attention to my interest in this issue. Before we discuss the clause, I should reiterate that I am currently the honorary vice-chairman of the Construction Industry Council, and have for the past four years been respectively its chairman and deputy chairman. I thank the hon. Member for Peterborough for his kind remarks about my past in relation to the fire service. I am afraid he will groan when I tell him that I have a past in relation to the construction industryI was Construction Minister between 1997 and 2001. Before that, I was an Opposition spokesperson on such matters and spent some considerable time on what became the Housing Grants, Construction and Regeneration Act 1996.

Ian Stewart: Is this an application for anything?

Nick Raynsford: No, no. I just think that hon. Members should be aware of my perspective on the issue. The 1996 Act gave effect to the recommendations that came from the Latham review, which was an important review seeking to tackle the problems of excessive conflict and litigation in the construction industry and encouraging more partnering and collaborative work. The Act has helped in many ways to deal with unnecessary disputes, reducing the amount of conflict in the industry, and to provide speedier remedies for disputes through the adjudication procedure and greater certainty about payment. Despite the progress, there are still difficulties in this part of the Bill. It has been seen as necessary to tidy up some of the loose ends in the existing legislation, and also to take forward the process of assisting the industry in becoming more productive, less litigious and more effective.
There has been a lengthy period of consultation on the proposed clauses we are dealing with. Not every part of the industry has been happy. We are talking about a complex industry with a large range of different interests. Inevitably, the interests of main, sub and specialist contractors, consultants, manufacturers and others are sometimes different. Unsurprisingly, there was no overall consensus on the measures necessary to tidy up the 1996 Act, but eventually, a compromise emerged from those discussions, and that is broadly reflected in the clauses.
On the clause before us, the suggestion that somehow there might be problems arising as a result of widening the definition of construction contracts to include oral ones is not a correct perception. There is a difficulty with construction contracts, which are generally in writing, but where it is necessary to vary the contractprobably on site as a result of an unforeseen circumstancean oral instruction may be given. If that happens, the contract is no longer a purely written one, but a combination of written and oral. Given the current requirement that the contracts must be in writing, it could provide a loophole for a party trying to avoid adjudication by arguing that because there was an oral element in the contract, it would preclude the adjudication process. That loophole will be closed by the clause we are discussing.
I put it to the hon. Member for Peterborough that, although I hear the concerns raised by the Construction Confederation, it would be a retrograde step to oppose the widening of the definition to include oral elements, due to the circumstances I have explained. That is widely seen as a way of helping to ensure that adjudication is effective and cannot be frustrated by litigious parties who are simply trying to force their way through and bully other parties to a construction contract by using the law. In my view, the change is welcome. I hope that the Government will press it, and that the Opposition will not oppose it.

Sarah McCarthy-Fry: I welcome you to the Chair, Mr. Illsley, and I thank hon. Members across the Committee for their kind words.
There are two points that I want to deal with, the first being that made by the hon. Member for Peterborough about the worry that the contracts would lengthen the adjudication process. It is worth reminding him that we are not requiring parties to use adjudication; it is available to them if they feel it is appropriate in their circumstances. It may well be that adjudicating an oral contract is the most cost-effective way of determining a dispute. It may be more expensive than adjudicating a written contract, but it would still be much cheaper than deciding the dispute through litigation. We think we should let people choose for themselves.
On the wider point about a single statutory adjudication scheme, it would introduce greater clarity and simplicity but it would also represent a much more significant intervention into freedom of contract and would prevent parties from agreeing the best process for resolving disputes under their particular form of agreement. It could also curtail any future innovation in the adjudication process. We have decided that the balance falls on the side of maintaining parties freedoms. However, the point is not an unreasonable one, and we have made the offer to industry that we will conduct a thorough review of the existing adjudication system set out in secondary legislation when we amend it as a consequence of the changes we are making to the 1996 Act.

Stewart Jackson: I thank the Minister for her answer. Will she elucidate the remarks made in the other place on 3 March by Lord Brett in Grand Committee when talking about a single scheme for adjudication?
That would not be unreasonable. Therefore, we have made an offer to the industry that we will conduct a thorough review of the existing adjudication scheme set out in secondary legislation when we make amendments[Official Report, House of Lords, 3 March 2009; Vol. 708, c. GC293.]
What time scale is the Minister looking at for that review, given that this process has been dragging on, with consultation, for seven years?

Sarah McCarthy-Fry: I wish I could answer the hon. Gentleman. I will have to say, as soon as possible and practical, unless inspiration arrives at some point, in which case I may be able to elucidate further later on. I will undertake to write to the hon. Gentleman.

Question put and agreed to.

Clause 135 accordingly ordered to stand part of the Bill.

Clause 136

Adjudicators power to make corrections

Question proposed, That the clause stand part of the Bill.

Stewart Jackson: This clause is relatively easy and uncontentious, so we will not burden the Committee. It inserts the new subsection (3)(a) into section 108 of the Housing Grants, Construction and Regeneration Act 1996, requiring parties to a construction contract to provide in the contract the adjudicators power to correct a clerical or typographical error. We do not have any problems with this tidying-up exercise. It is broadly welcomed by most members of the construction community and we are happy, subject to the Ministers comments, not to divide the Committee.

Sarah McCarthy-Fry: As the hon. Gentleman said, this clause ensures that adjudicators can, generally speaking, make corrections to their decisions, and inserts into the 1996 Act the requirement that the construction contract should provide that
the adjudicator has the power to correct a clerical or typographical error
in his decision
arising by accident or omission.
This puts on a clear statutory footing an adjudicators ability to amend an obvious error in their decision. The 1996 Act is currently silent as to the power of an adjudicator to correct such errors.
Reverting to the previous clause, the review of the statutory scheme will be in 18 months.

Question put and agreed to.

Clause 136 accordingly ordered to stand part of the Bill.

Clause 137

Adjudication costs

Question proposed, That the clause stand part of the Bill.

Nick Raynsford: I rise to make two points. First, I very much welcome the provisions of the clause. It closes a loophole that has been used by some parties to try to frustrate the procedures put in place by the 1996 Act to allow adjudication as a relatively quick and low-cost means of overcoming disputes. Where parties insist that the full cost of adjudication is met by the subcontractor, it would provide a serious deterrent to a subcontractor seeking adjudication. This particular device has been deployed to discourage the use of adjudication.
The change here, which makes it unlawful for any agreement on apportionment of costs prior to the appointment of an adjudicator, is entirely sensible. There is, however, an unfortunate by-product. Where there is a need to apportion the costs in order to ensure that the adjudicator is paid, that is not necessarily covered under the new provisions. The Royal Institution of Chartered Surveyors suggests that an amendment should be made to allow for the adjudicator to propose the apportionment of costs between the parties and to ensure that the parties are jointly and severally liable for the adjudicators costs.
That seems an eminently sensible proposal. It was advocated in the other place by Baroness Hamwee of the Liberal Democrats. I think the Government undertook to consider it sympathetically, so I am disappointed that there is no Government amendment today.
I have the greatest sympathy for my hon. Friend the Minister who has had to pick up this brief at very short notice and has now been told that she is going to relinquish it almost immediately. I am sorry to bowl her this googly, but would she please tell the Committee whether the Government are sympathetic in principle to the RICS amendment? Would they be willing to accept such an amendment on Report were I to table one, which I am minded to do?

Sarah McCarthy-Fry: I thank my right hon. Friend for his comments. The Government are sympathetic to the views, but we have looked at the situation and we have decided not to legislate at this time. However, we would be happy to meet the RICS to discuss its concerns. In the meantime, I commend the clause to the Committee.

Question put and agreed to.

Clause 137 accordingly ordered to stand part of the Bill.

Clause 138

Determination of payments due

Question proposed, That the clause stand part of the Bill.

Stewart Jackson: This clause is more contentious and involves the removal of conditional payment provisions and the pay-when-certified provisions. There is concern about section 113 of the Housing Grants, Construction and Regeneration Act 1996, which has been communicated to all members of the Committee. Section 113 is a pay-when-paid provision which is used in the event of a main contractors client or customer going into insolvency. In other words, a subcontractor will not get paid at all in the event that a main contractor does not receive anything from his client or customer. This is a significant worry for small and medium-sized enterprises who are concerned that this clause of the 1996 Act will be used to prevent them being paid in a timely and reasonable way. The specific point raised by members of the construction community was that the former Department of Trade and Industry consulted on removing this exceptional sub-clauseor clause of the new construction actfour years ago. It gave an undertaking at the time that it was minded to remove that clause to assist small and medium-sized enterprises. The Ministers predecessor in what was then the DTI indicated that it would be removed. However, the Department for Environment, Food and Rural Affairs decided to impose the provision nevertheless, but at the same time agreed there should be a full review of insolvency law and practice as applied to the construction industry. That review was never instigated.
Finally, to sum up what is quite a complex clause, the question asked by many in the construction industry is why should small and medium-sized enterprises act as insurers in respect of both the main contractors insolvency, and the clients insolvency? We are looking to receive today undertakings from the Minister that she understands the difficulties this clause may give rise to. Is there a review specifically around this and could it be subject to secondary legislation in the future? If we do not receive sufficient undertakings and reassurance, we would certainly look to amend this clause on Report.

Daniel Rogerson: I am following the hon. Gentlemans argument and it will not surprise him to know that we have heard similar concerns. I draw his attention and that of the Committee to new clause 21, which stands in my name. We will reach that later on in proceedings, but it seeks to address similar issues.

Sarah McCarthy-Fry: I was getting a little confused there, I must admit. I dug out my notes for new clause 21 because I believe it addresses exactly that. Perhaps, Mr. Illsley, it would be better to wait until we get to new clause 21 before I deal with those points.

Question put and agreed to..

Clause 138 accordingly ordered to stand part of the Bill.

Clause 139

Notices relating to payment

Daniel Rogerson: I beg to move amendment 169, in clause 139, page 83, leave out lines 8 to 10.

Eric Illsley: With this it will be convenient to discuss the following: amendment 170, in clause 139, page 83, leave out lines 14 to 24.
Amendment 171, in clause 139, page 83, line 30, leave out from subsection to (3)(a).
Amendment 172, in clause 139, page 83, leave out line 33 to line 23 on page 84.

Daniel Rogerson: I would not claim to be an expert on the niche of contract negotiations in the construction sector and I think that will become patently obvious to the Committee as we continue our discussions about this part of the Bill. However, there is a particular issue that was raised with me for which I am grateful to the Federation of Small Businesses, an organisation that does a great deal of work on behalf of its members but also in trying to improve legislation and Government decision making. Among smaller contractors who are effectively at the end of the supply chain, there is concern that they are put at risk by some of the issues in the clauses as they stand. The current economic circumstances heighten that. One of the issues considered by our amendmentsI will be interested in what the Minister has to say about the points raised by the FSBis the issue of what is effectively an invoice, the payment notice, being sent by the person who is paying the bill, who is the person who holds all the cards. Also, a supplementary notice can be issued, changing the proposed amount for payment. There needs to be a process to resolve such issues, as the right hon. Member for Greenwich and Woolwich rightly said.
A concern is that a problem occurring in a higher tier of contract negotiations could impact very much on the people at the bottom, the people who are carrying out the work and, arguably, taking the most risk. The amendments remove the payers option to issue that initial notice and address the question of whether a supplementary notice can be issued altering the amount later in the process. I hope to hear a little more from the Minister about why the Bill as it stands is the solution that has been arrived at by the Government. How does she feel that smaller contractors in particular can be protected from losses?

Stewart Jackson: I would like to support the comments of the hon. Gentleman and to give a little perspective to the issues raised. In particular, clauses 139 and 140 have failed to win the support of significant parts of the construction industry, but also beyond it. Their effect will be to enable a payer to issue notices effectively telling the payee how much he is going to receive, which is a novel approach to cash flow. While that in itself is unusual, there is a further twistthe payer can reduce the amount of his original notice, as has been said.
The provisions were described by the RICS as extremely complicated and
unlikely to be understood by users in the industry
never mind Members of Parliament. The Chartered Institute of Building said that
the Bill is overly complicated and unworkable in relation to the revised payment provisions, which may result in higher administration costs, delayed payments and unintentionally more adjudication.
The Federation of Small Businesses and the Specialist Engineering Contractors Group have made similar points. The point raised by the SEC Group was about how a small business can manage its cash flow, put up a good case to its bank when borrowing money, or be sure of paying its employees when faced with that particular scenario. It is the most difficult part of the part 8 construction contracts. Depending on the Ministers answer, we are minded to support the Liberal Democrat amendments.

Barry Gardiner: I have been contacted about the clause by three young constituents who told me that they normally assume an application for payment, but the provisions of the clause as they understand them will, in effect, enable their customer to dictate what they will be paid. The clause enables that customer to issue an initial notice of due payment, but then to reduce that by issuing a subsequent notice, which notice can only be challenged by legal proceedings. As my constituents have done the work, they naturally consider that they have the right to issue a notice of due payment, which would be paid. On the other hand, they accept that if the customer raises a subsequent notice that reduces the amount that my constituents have requested, they can accept that the amount in that notice will be the sum that will be paid, provided that there is some justification for a lesser amount. The customer should ensure that his notice is issued within an appropriately short period. Under the current proposals, he could issue his second notice weeks or months after the due date for payment. That would obviously have a great impact on cash flow.
With regard to subsection (1)(a) of proposed clause 110A, it seems quite sensible, pace the amendment, to provide that a specified person might give notice rather than the payer. There are cases in which a designated architect would specify whether the work had drawn to a completion at a particular phase of the contract. I do not entirely support the amendment, but I would like clarification on the substantive point that I believe it is trying to address.

Sarah McCarthy-Fry: I understand that the amendments would create a position in which only a payee could issue the statutory payment notice. Under the 1996 Act, only the payer can issue the statutory payment notice. The Bill removes that restriction, allowing the payer, the payee or a third partyfor example, an architect working for a customerto issue the notice, and we leave it to the parties to agree in contract who should do so. The reason for that is that the provision is permissive, allowing a broad range of commercial practices to continue unburdened by legislation. We do not prevent the payee-led process suggestedfar from it. We expressly allow it and, similarly, we allow others to use processes that reflect their own commercial logic as they see fit.
It is suggested that the legislation is over-complex. Part of its complexity is due to the fact that is drafted to catch a number of scenarios. For example, we allow the payer, a third party or the payee to issue the payment notice; the contract will simply require that one of them can perform that function. A payer will be entirely clear whether he or she is issuing the statutory payment notice, whether a third party is doing so, or whether he or she should rely on the payee to make an application to determine the sum due.
The underlying process is simple. A payment notice is served setting out the sum considered to be due. That sum can be revised. The sum becomes payable. That is the process that will be incorporated into contracts. Contracts will clearly set out who is responsible for issuing the payment notice.

Stewart Jackson: I thank the Minister for her generosity in giving way. We all want to see equality between the various players in the construction industry, both small and large. Will the Minister give an undertaking to consider taking up the idea of the statutory trust fund, perhaps in secondary legislation, once the Bill is enacted? It works successfully in New Zealand, Canada, the United States and throughout Europe; it brings a lot more equality and less bureaucracy and it is easily understood.

Sarah McCarthy-Fry: The Government are always happy to consider other approaches if they turn out to be practical, and we always consider examples from other countries if they are applicable here.
I should point out that the payees invoice has no status under current legislation. The clause will give it much greater weight in determining what is payable. Invoices can be payment notices if the parties agree on payee payment notices in their contract. That is a significant step forward, as it crystallises the amount that should be paid. Moreover, even if the parties agree upon payer payment notices, the Bill will allow the payee to issue a payment notice if the payer neglects to do so.
Permitting only the payer to issue the counter-notice is the quid pro quo. We want to strike a balance between the interests of payers and those of payees. Given the lack of widespread industry support for payee counter-notices, and the fact that payee counter-notices could oblige payers to pay more than was owed, we could not accept payee counter-notices.
Officials discussed with industry stakeholders proposals for imposing a deadline before which the counter-notice must be issued, but the feeling was overwhelmingly against such a move. Many of those asked said that payers would simply extend the payment period to mitigate the risk of overpaying and/or issue conservative valuations of the work undertaken.
Although we would gain greater certainty about what would be paid, we would do so at the expense of extending payment periods and reducing the amount of cash flow, and the objective of the legislation was to keep the cash flowing. In any case, a counter-notice must be served before the final date for payment, and the new sum set out in the counter-notice must be paid before the final date of payment. It is not as though the payer can indefinitely delay serving such a notice as a means of indefinitely delaying payment to a payee. With that, I hope that the hon. Gentleman will withdraw his amendment.

Daniel Rogerson: I congratulate the Minister again on how she has got to grips with the brief, given that she has not had the opportunity to be involved in the negotiations and discussions. However, the representations received by Committee members suggest a significant body of opinion in the world that will have to implement these measures that the provision is not yet quite right and that changes are necessary. I would be letting people down if I did not give hon. Members the opportunity to vote.

Nick Raynsford: I put it to the hon. Gentleman that when the original provisions were introduced by regulation in 1998, based on the 1996 Act, there were many voices across the industry that expressed anxiety and disagreement with some of them. That is the nature of the construction industry; it is hugely diverse, with many parties whose interests are not always the same. In reality, the result of the introduction of the 1998 provisions is a step forward. Although there are inevitably discordant voices about the proposed changes, I suspect that those differences are inherent in the nature of the industry and do not reflect on the changes being introduced. The proposals have been the subject of detailed discussion and, in my judgment, will improve a process that has undoubtedly taken a lot of litigiousness and adversarial behaviour out of the industry. I counsel the hon. Gentleman against giving too much credence to the negative voices. Let us see how the changes work in practice.

Daniel Rogerson: I am, as always, grateful to the right hon. Gentleman for his intervention. I am usually happy to take his advice and hear the benefit of his experience, but on this occasion, I would like to test the Committees opinion. I come from a Cornish background. SMEs are dominant in our economy, and I am concerned because their representatives feel that the changes could be a problem and could put their work at risk.

Question put, That the amendment be made.

The Committee divided: Ayes 6, Noes 8.

Question accordingly negatived.

Clause 139 ordered to stand part of the Bill.

Clauses 140 to 142 ordered to stand part of the Bill.

Schedule 7 agreed to.

Clauses 143 to 145 ordered to stand part of the Bill.

Clause 146

Short title

Amendment proposed: 1, in clause 146, page 88, line 28, leave out subsection (2). (Ms Rosie Winterton.)

This amendment removes the standard privilege amendment made in the House of Lords.

David Curry: This is an historic moment; I think an amendment is actually going to be accepted. Perhaps we ought to have a hallelujah chorus at this stage in the proceedings. However, I am intrigued by the amendment, which would delete a subsection that states:
Nothing in this Act shall impose any charge on the people or on public funds, or vary the amount or incidence of or otherwise alter any such charge.
In other words, the statement in the Bill that there will be no charge to individuals or public funds is being deleted, so presumably there will be a charge. If the provision is wrong, how did it get there in the first place? The amendment, in practice, reverses a position. It is not a drafting amendment; it is a substantive amendment. I should like to know a little bit about it. It is nice to have an echo of the previous Minister in this Committee, even in one amendment, but I am intrigued by what it is all about.

Rosie Winterton: The amendment is purely a formality. The privilege clause is inserted in any Bill that starts in the Lords to prevent the Lords from contravening Commons privilege, and it needs to be removed now that the Bill is being considered in the Commons.

David Curry: We learn something every day, Mr. Illsley.

Amendment 1 agreed to.

Clause 146, as amended,ordered to stand part of the Bill.

New Clause 1

Award of construction projects
In considering the award of a contract in accordance with the Housing Grant, Construction and Regeneration Act 1996 (c. 53), a local authority may have regard to
(a) their functions under section 66 of the Local Democracy, Economic Development and Construction Act 2009 (local authority economic assessment); and
(b) the desirability of maintaining a diverse range of contractors in its local authority area..(Dan Rogerson.)

Brought up, and read the First time.

Daniel Rogerson: I beg to move, That the Clause be read a Second time.
I wanted to raise some questions about local contracting and the desirability of local authorities having regard to that. The new clause, which was tabled by Members who could not join us on the Committee, sets out a helpful principle. It does not, as far as I can see, restrict local authorities, in that it does not instruct them always to look to local contractors or anything like that. However, it focuses the mind on clause 66, which deals with local economic conditions. The new clause would be a useful addition to the Bill.

Sarah McCarthy-Fry: The new clause appears to be about access for local contractors to local authority construction contracts. The issue was raised on Second Reading. The new clause would permit local authorities considering the award of construction contracts, as defined by the Housing Grants, Construction and Regeneration Act 1996, to have regard to the assessment of the economic conditions in their area and to the desirability of maintaining a diverse range of contractors. Part 2 of the 1996 Act, which regulates construction contracts, sets out the rights to adjudication, staged payment and the suspension of performance under the contract. The legislation has generally worked well, but has been ineffective in certain areas. Part 8 of the Bill addresses those weaknesses.
The new clause does not relate to that issue, however. It appears to use the 1996 Act definition of a construction contract as a convenient hook on which to hang another issuethat of securing preferential treatment for contractors in a local authoritys area by pinning awards on the economic assessment of conditions in a local authoritys area and the range of contractors available locally.
The drafting of the new clause is unclear. It is difficult to understand what is meant by
the desirability of maintaining a diverse range of contractors in its local authority area.
It may mean the desirability of protecting local businesses from recession by ensuring that they receive preferential treatment in the award of local authority contracts. That is incompatible with the EU procurement regime, which requires procurements by public bodies, including local authorities, to be advertised competitively throughout the EU if the value is above the threshold. There are limited exceptions to that regime, but none appear to be relevant here. The new clause suggests that local firms should be favoured over competitors from the EU and elsewhere in the UK. Such unequal treatment or discrimination would mean that a competitor, whether inside or outside the UK, could challenge the procurement process or the award of the contract if it has gone to a local company that has received preferential treatment.
Our view is that a mixed economy of service provision is how local authorities achieve best value in the delivery of their services. In statutory guidance published last year, Creating Strong, Safe and Prosperous Communities, the then Secretary of State reaffirmed that commitment. The relevant paragraph states that
best value is more likely to be achieved where there is a positive approach to achieving a mixed economy, rather than where any one supplier dominates the provision of services in an area.
Leaving that matter within statutory guidance ensures that local authorities have the necessary flexibility to be able to consider the circumstances for each contract. I therefore ask the hon. Gentleman to withdraw the clause.

Daniel Rogerson: The Minister will be pleased to hear that I do not intend to press the motion to a Division. However, there are important points to be made.
In an area such as mine, where many of the businesses are smaller ones, a local authority might be able to shape the time frame and the way it collects bids for contracts to allow groups of smaller contractors to form consortiums so that they can bid successfully against larger operators that operate across the whole country. That is not to say that the larger operators do not provide best value; however, in many cases they will not be able to and are just able to act more quickly in getting their bids in.
The new clause was intended to enable us to explore whether local authorities can carry out their procedures in such a way that it creates a level playing field and takes account of factors that might act on local contractors. I am pleased to have had the opportunity to air that issue and I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 2

Referendums
(1) A principal local authority must provide a facility for the holding of referendums
(a) in electronic form, or
(b) in such other manner as the authority considers appropriate.
(2) A principal local authority must give reasons for not granting a request to use the facility provided by it under this section for the holding of a referendum.
(3) A principal local authority must make a scheme (a referendum scheme) for the holding of a referendum.
(4) A referendum scheme must be approved at a meeting of the authority before it comes into force.
(5) A principal local authority must publish its referendum scheme
(a) on its website, and
(b) in such other manner as the authority considers appropriate for bringing the scheme to the attention of persons who live, work or study in its area.
(6) A principal local authority may at any time revise its referendum scheme (and subsections (3) and (4) apply in relation to any scheme which is revised under this subsection).
(7) A principal local authority must comply with its referendum scheme.
(8) Subject to that, nothing in this Chapter affects the powers or duties of a principal local authority in relation to any referendum held..(Mr. Goodman.)

Brought up, and read the First time.

Paul Goodman: I beg to move, That the clause be read a Second time.
It is a pleasure to see you in the Chair, Mr. Illsley. Although time is drawing on, the new clauses give us a chance to change the Bill from a centralising measure into a real instrument of localisation. The hon. Member for Manchester, Blackley (Graham Stringer) is not here to move his new clausethe Committee has previously discussed his mysterious disappearance from the Committee membership and have speculated about where he may be nowbut we have decided, in a spirit of benign good will, to move the new clause for him and see how we get on.
Although the new clause may be technically flawed, so we are not absolutely insistent on pressing it to a vote at this stage, it gives us an opportunity to discuss and consider the whole principle of referendums in relation to local government. The new clause raises questions such as whether such referendums should take place, how often they should take place, and where they should fit in the general scheme of things. The big issue at stake, which my right hon. Friend the Member for Skipton and Ripon explored during part of his speech on Second Reading, is the balance that must be struck in any democracy between representative democracyelecting Members of Parliament, councillors and so on to represent views in the Commons or, in this case, local councilsand direct democracy, which includes the use of referendums.
It has to be admitted that traditionally Britain has not used referendums greatly, and that the way of some places abroad, such as California and Switzerland, has been to use them more often. Since the 1970s, however, we have begun to use referendums at national level to decide important constitutional issues with greater frequency. There was a 1975 referendum on EU membership and there have been referendums in Scotland, Wales and Northern Ireland on whether Parliaments and Assemblies should be set up in those parts of the United Kingdom, so it seems right at this point to pause and consider whether it would be right to have local referendums run by local councils and, if so, in what circumstances.
If we take a step back from the new clause, it is clear that, in contemporary politics, the debate between when representative democracy should apply and when direct democracy should apply has become very live. It would be out of order for me to spend any time on the recent expenses debacle, but it is a sign of the degree to which the internet and modern communication and technology are leading many people to probe and question the traditional elected representative model. Indeed, we have heard calls, which I am sure will be considered in other contexts, for the recalling of Members of Parliament between elections. That argument is about the degree to which the traditional model of the electorate electing a representative and allowing themas the electorate wishto stand again for election should apply.
My hon. Friend the Member for Harwich (Mr. Carswell), who is sadly not a member of the Committee, and my former work colleague, Daniel Hannan, have written a book called The Plan: Twelve Months to Renew Britain in which they wish local referendums to be a major element in how local democracy works. I am kicking myself for not bringing my copy along to wave at the Committee and excite its interest even further. My hon. Friend and Mr. Hannan want quite a low trigger for local referendums.
Our view is that there has to be a balance, but that the traditional model, whereby it is assumed at local level that councillors will be elected and then put up for re-election every four yearsjust like Members of Parliament and the parliamentary cycleand the referendum instrument can never apply, is not the right balance.

Stewart Jackson: My hon. Friend is making a very persuasive and cogent argument for referendums. Does he agree that referendums seek to revitalise and rejuvenate local democracy, as seen, for instance, in the Greater Manchester congestion charging referendum, which was very successful in engaging people on the issue of expenditure and transportation? Before that, he will remember the Bristol city council referendum on council tax when people were engaged in discussion about local public expenditure priorities.

Paul Goodman: I am grateful to my hon. Friend. He is right that local referendums can fulfil that role. The question is about where the balance lies, as it would be with national Government.

David Curry: My hon. Friend will recall that referendums have been held with built-in criteria on turnout. Those failed. If one does not have criteria, one could have a referendum, but not a legitimate outcome.

Paul Goodman: My right hon. Friend is correct. The amendment simply sets out the machinery by which a referendum would operate. The question of turnout is extremely important. I must not get diverted to national referendums, but he will remember that the question of turnout was vital in the consideration of Scottish devolution between 1974 and 1979. He makes an important point. Where should the balance lie? We are persuaded that referendums should apply to council tax rises above the national threshold, as is stated in our Green Paper.
In conclusion, we think that referendums have a place. We would be very interested to hear what the Minister has to say about the new clause and whether the Government believe that there is no place at all for referendums in local government. That would be a basis for arguing against the new clause. However, we think that the hon. Member for Manchester, Blackley did well to table the new clause to allow debate. We are grateful to have the opportunity to consider it this afternoon.

Julia Goldsworthy: In moving the new clause, the hon. Member for Wycombe raised an interesting philosophical question about the extent to which our democracy is a representative one or one in which more decisions should be taken by referendums.
However, I wonder whether the hon. Gentleman has a one-eyed view on how the proposal should work. For example, he speaks about the need for the issue to be addressed at local level, but not necessarily at parliamentary level to the same extent. Equally, he referred to his partys suggestion for referendums if council tax increases are above a specific threshold. Presumably the flip side is that people should have the right to call a referendum if they feel that cuts in services extend beyond what they feel is acceptable. He did not seem to offer a balanced view.

Paul Goodman: Of course, we have been calling for a referendum on the Lisbon treaty, which is a national referendum.

Julia Goldsworthy: That is true. I have not had the pleasure of reading the document to which the hon. Gentleman referred, but it sounded as though it referred only to the need for a mechanism at local level, rather than to the equivalent national mechanism.
My hon. Friend the Member for North Cornwall and I are sympathetic to a facility for people living in a local authority area to have the right to trigger a referendum. Our question is on a theme that is familiar from earlier parts of the Bill: is it necessary to set that out in primary legislation? I would be interested to hear from the Minister the extent to which the facility is already available to local authorities that may wish to use it.
The new clause does not set out the precise mechanism. It merely requires that a mechanism be in place. We are sympathetic to the sentiment behind the new clause, but the Ministers comments might be helpful in setting out the extent to which the option is already available to local authorities.

Rosie Winterton: This is an important issue. Members of the Committee have asked whether the current powers should go further, and what they actually are. At present, under section 116 of the Local Government Act 2003, principal local authorities in England already enjoy considerable flexibility to hold advisory referendums. The power is widely drawn. It gives councils a great deal of freedom and flexibility to hold referendums on any issue relating to their functions or their powers of well-being set out in the Local Government Act 2000.
It may well be, as a result of the petitions part of the Bill, that local councils could decide to hold a local poll as part of their substantive response as required by clause 14, but that is about councils having the ability to choose a referendum if they feel that it would be the right thing to do.
While the petition provisions in chapter 2 of the Bill and the existing powers in section 116 of the 2003 Act permit councils to hold referendums, the new clause would require them to do so. We believe that it is right to give local authorities flexibility, but over and above that there would be an additional, uncosted burden. Therefore, the implications for local authorities could be considerable. We believe that the new clause goes too far in requiring referendums when there is already a power to hold them. I hope that the Committee will reject it.

Paul Goodman: In the light of what the Minister has said about the effects of the new clause tabled by her hon. Friend the Member for Manchester, Blackleyshe clearly did not like it very muchwhich would require local authorities to have referendums, we will not seek to press the new clause to a vote, although we have enjoyed the opportunity to have the debate. I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 7

Power of general competence
(1) The Local Government Act 2000 (c. 22) is amended as follows.
(2) Sections 3(1) to (4A) and (8) are deleted.
(3) After subsection 8 insert
The Secretary of State must prepare proposals to devolve more functions to principal local authorities (as defined in Clause (3) of this Act) within the period of one year beginning with the day on which this Act is passed..(Mr. Goodman.)

Brought up, and read the First time.

Paul Goodman: I beg to move, That the clause be read a Second time.
We are keen to have this debate about the possibility of giving to local authorities a power of general competence. I hope that it is in order if, by way of introducing the new clause, I say a few words about the constitutional framework in which local government is set, and if, in doing so, I begin by saying that in many ways power has been drawn away from the Executive in recent years. They must not look too surprised, as I will be coming in a few moments to ways in which they have drawn more power to themselves, but I wanted to start there.
Clearly, members of the Executive have in recent years seen some of their powers move away from them to the European institutions, the new British institutionsthe Scottish Parliament, the Welsh Assembly, the Northern Ireland Assembly and so onto quangos, and to the courts. The movement of those powers to the courts is largely a result of the impetus that the Human Rights Act 1998 has given to them in terms of, in effect, making legislation rather than merely interpreting it. However, the Executive have made up for that in recent years by drawing more powers to themselves. They have drawn those powers from the legislaturethat has been much debated recentlyand, of course, also from local government.
At this point, all parties that have been in government and have also been in opposition, as we have, must concede that that process has been going on for a very long time. At least since the warif not beforecentral Government have got into the habit, under our written constitution, of interfering and directing what local councils do. My right hon. Friend the Member for Witney (Mr. Cameron) recently made a speech in which he drew attention to the many ways in which that imbalance is now causing severe difficulty at a local level.
As Members of Parliament, we all know what it is like to have petitions brought to us about saving wards in a local hospitalthat is an experience that we have been through in Wycombeor about post office closures. We also know what it is like to have constituents come to us to complain about the lack of power that local authorities have in relation to the siting of phone masts. We all know the degree to which constituents feel emotions ranging from frustration to rage and how little power they feel Members of Parliament have. We often hear people complain, You cant do anything. Youre all the same, but that now also applies to local councillors. One only has to read the e-mails and letters in the local newspapers letters column that say, Members of Parliament and councillors are all powerless. They cant do anything and theyre all the same because real power is vested in Westminster and Whitehall. That is where the clause comes in.
Obviously, local councils can act only when they are empowered to do so by legislation. If they do not do that, decisions that have been taken will be struck down by the courts as ultra vires. We are obviously not proposingI do not think anyone wouldthat local councils should become a new source of legislative authority. Ultimately, there can only be one source: the Queen in Parliament. However, there is no reason why not and every reason why Parliament should seek to ensure that power is distributed as widely as possible. In a democracy, there must be many sources of powerwhether they are the European institutions in some cases or local institutions.
The clause would change the presumption in law that local councils really only have whatever power Parliament decides to give them. The clause seeks to flip that arrangement round and put on the statute book a measure that would essentially allow local councils to have a general power of competence. It would then be up to Parliament to set up what they cannot do. We are obviously not suggesting that local councils should be able to raise taxation.
The Minister will doubtless argue that the Local Government Act 2000 has already given local authorities the power to do anything that they consider is likely to promote or improve the economic, social and environmental well-being of any part of their area. That is what Ministers call a power of first resort. The argument against the case that the Minister will doubtless put to the Committee is that the scope of the provision in the 2000 Act is not clear and that legal departments in local authoritieswhich naturally are very cautious, as legal departments tend to beare very wary of using the powers because of legal challenge.
I am not sure yet whether we shall press the new clause to a vote. We want to hear what the Minister has to say about the way in which the measure is constructed. However, we would like to see on the statute book in principle, as part of our green paper, a general power of competence that would allow councils, including town and parish councils, to carry out any lawful action, undertake any lawful works, operate any lawful business or enter into any lawful transaction. This would simply be a way of ensuring that on the statute book the powers that local councils havethat Ministers argue are now present in the 2000 Actare clearly spelled out.

Daniel Rogerson: To the hon. Gentlemans argument for this power being given to local government, my party would simply reply yes. We have long advocated greater power for local government. When considering his remarks and reflecting on the recent history of Governments of both the Conservative and the Labour persuasion, we realise that there has been a general tendency to take power in some forms away from local government and vest it in quangos or unelected regional authoritieswe have had a debate about the desirability of elected and more accountable regional authoritieson the basis that certain decisions are best taken at a level that is most appropriate to them and that that is the best place to air views and have the debate.
We could go back somewhat further in history and look at Liberal Governments getting themselves hung up on questions of devolution. Famously, several of them foundered over it, particularly with regard to Ireland, but it is fair to say that our party has always had a commitment to trying to disperse power and decision making wherever possible. In the history of this country, that has probably been done most effectively with local authorities, which do a very good job, although people often feel, as the hon. Gentleman said, that sometimes the hands of local decision makers are tied. The new clause would provide an opportunity to restore more of a balance and allow local authorities more creativity to come up with more local solutions. That is also the direction of travel that the Sustainable Communities Act 2007 is moving us in. We would welcome it.
The hon. Gentleman also talked about the constitutional framework. Part of the problem is that in this country we do not have so much a constitutional framework as a fairly rickety structure that bits have been bolted and screwed on to and taken off over the years. Perhaps we can have that wider argument another time, but my party believes and always has believed that re-evaluation of the constitutional position and some form of written constitution is the right way to go. I am not sure whether the view of the Conservative party has moved on that subject at all, given that everything seems to be up for debate at least, if not for the issuing of policy.
We welcome the chance to debate this issue and we would certainly support the hon. Gentleman should he seek to press the new clause.

Rosie Winterton: This is certainly a very important issue and I, too, welcome the opportunity to debate it, because that also provides an opportunity to make some general points about the views of local authorities. As I think hon. Members have said, the well-being power can be used by local authorities to do anythingwith the exception of raising money or things expressly prohibited by legislationthat will have an impact on the promotion or improvement of the social, economic or environmental well-being of their area. The breadth of the power is such that councils can regard it as a power of first resort when seeking to improve outcomes for their communities. It has been especially useful in the current economic downturn for authorities, because it can be used to respond quickly to changing circumstances in many areas, to cut through bureaucracy and get help to people quickly when they need it.
There are, of course, certain limitations to how the power is used, and the Secretary of State retains the right to intervene if it is not being used appropriately. The new clause seeks to remove some of those limitations. For example, the deletion of section 3(1) would mean that local authorities could use the power to bypass other legislation and to do things, as I have said, that are currently prohibited or limited by legislation. Parliament has approved restrictions in specific legislation that will have been debated in the House, but if there is legislation that applies undue prohibitions or limitations, or is outdated, we have the ability to consider whether those limitations are still appropriate. Under section 5 of the 2000 Act we have the power to change legislation, and would do in appropriate cases. The deletion of section 3(2) would allow local authorities to raise money using the power, for example by imposing charges or taxes. Legislation exists that allows local authorities to do that within some carefully constructed frameworks.
The deletion of section 3(3), (4) and (4A) would remove the Secretary of States reserve power to prevent the use of the well-being power. That is a reserve power and has never been used. It cannot be used lightly, because it is subject to a statutory requirement to consult, and requires the approval of Parliament via the affirmative procedure. It is a power of last resort, but one which we should retain.
The new clause also inserts new text regarding proposals to devolve more functions to principal local authorities. It is not exactly clear what the particular proposals might be, but I assure the Committee that the devolution of power to local authorities and the empowerment of communities are constantly under review.
I accept that more needs to be done to encourage local authorities to use the well-being power. I am interested in the points that hon. Gentlemen have made about how local authorities perhaps feel that they do not have the necessary powers to undertake any particular activities. I am interested in having discussions with local authorities about which particular powers they feel they would need more of. I am interested in entering the debate with the local authorities about what they feel is particularly lacking under this power, but the new clause goes the wrong way about having that debate. I hope that the hon. Gentleman will withdraw the new clause, given our clear commitment to discussing with local authorities what more they feel we could do within existing legislation.

Paul Goodman: The Minister has not persuaded usat least, those of us on the Conservative Benchesthat she is as enthusiastic about allowing local authorities to exercise the competencies as we would like. None the less, she made a good lawyers argument. She did what I think we would do if we were Ministers, looking at the new clause and arguing that if it came into effect, this, that and the other would be the consequence, including the granting to local authorities of tax-raising powers, if I heard her correctly.
For those reasons, we will not press the motion to a vote. Ministers are skilful at putting forward such arguments, and we must take them seriously when they are put, but we look forward to returning in due course to the debate about the competencies of local authorities. I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 8

Abolition of comprehensive area assessments
(1) Sections 99 and 100 of the Local Government Act 2003 (c. 26) are deleted..(Mr. Stewart Jackson.)

Brought up, and read the First time.

Stewart Jackson: I beg to move, That the clause be read a Second time.
Following on from the theme so ably articulated by my hon. Friend the Member for Wycombe, I rise to speak to new clause 8, which proposes the abolition of comprehensive area assessments, the unloved twin brother of comprehensive performance assessments that came into force this April.
I have two separate quotes. One is from the 1997 Labour party manifesto:
Local decision-making should be less constrained by central government and also more accountable to local people.
The other is from a 2007 Ministry of Justice Green Paper entitled The Governance of Britain, which said after 10 years of Labour Government that
power remains too centralised and too concentrated in government hands.
That centralisation of power, particularly the application of sanctions to local authorities, is now vested in the comprehensive area assessment. It might be as well to examine the facts behind that.
Local councils are subject to a significant inspection regime. That said, the Government do not keep any central records of the cost of inspections to local government, but in his inquiry into local government in 2007, Sir Michael Lyons used an estimate prepared by the National Audit Office that said it was about £2 billion a year. Michael Frater, the original head of the Lifting the Burdens Task Force, stated three years ago:
Eighty per cent. of the costs of the performance regime relate to councils reporting to central government, not reporting to the community. It defies all common sense.
The comprehensive area assessment followed best value and the comprehensive performance assessment, as Committee members know; if nothing else, we have established during these proceedings that they are avid readers of Control Shift, the Conservative local government manifesto published this February, and well they might be, as it is a blueprint of the Conservative Government to come in 10 months time.
Control Shift made the point that the present inspection regimes are expensive, bureaucratic and often ineffective, in so far as they put a premium on procedural performance rather than on the demonstrable delivery of local public services, which would enhance accountability to local electors. My hon. Friend the Member for Wycombe made a passionate defence of localism in his remarks on referendums. It is important to realise that what we have seen is not just the accretion of power to a central unitary state. If I am honestI hope my right hon. Friend the Member for Skipton and Ripon covers his ears at this pointthis did not start on 1 May 1997; I accept that. However, it has certainly continued at a precipitous speed.

Nick Raynsford: The hon. Gentleman has devoted about 90 per cent. of his remarks to alleged central control, and only about 10 per cent. to performance. This debate is about performance assessment. Would he like to tell the Committee about the evidence of local government performance over the period of comprehensive performance assessment, and the comments of people such as Michael Frater, whom he quoted, who relished the accolade that his authority received for the excellent service delivery that was achieved when he was chief executive of Telford and Wrekin council? That recognition is seen by many in local government as rather better than the performance of central Government, which has been subject to a somewhat different performance measurement regime. Would the hon. Gentleman like to reflect a little on the effectiveness of performance management regimes in driving up standards of performance?

Stewart Jackson: The right hon. Gentlemans rhetorical agility demonstrates why, I am sure, he is missed by the Whips. We are not debating the history of comprehensive performance assessment and best value. If he wants to reflect on the record and the result of Government achievement, he might reflect on the 15.7 per cent. of the popular vote received in a national election two weeks agothe lowest ever of a national Government. In my book, that is a realistic recognition of the Governments performance so far.
Returning to my point, of course comprehensive performance assessment had its detractors. It was not all beer and skittles. There were people who thought that it was not that successful, and that it was not appropriate to be used in their local authority areas. Comprehensive area assessment has been with us for a relatively short period of time and the jury is out. If the right hon. Gentleman reads the Local Government ChronicleI am sure that, as an avid reader, he doeshe will know that there is a plethora of opinions on CAA, regarding both its current performance, and its future prospects.

Nick Raynsford: If the hon. Gentleman has also read into the subject, he will know that when the comprehensive performance assessment was introduced in 2001, it was almost universally condemned by local government spokespeople, who were virtually all against it. The result of that experience has changed the point of view of a lot of those people, which is why the hon. Gentleman now describes a more varied expression of opinion about CPA and CAA. The question that I put to him earlier, which he has not answered, was about whether he has thoughts on the performance levels of local government, and how far that performance has improved as a result of exposure to a performance management regime.

Stewart Jackson: I certainly feel that the preponderance of more people to vote Conservative and to elect Conservative councils in their area will inevitably drive up performance over the next few years. If CPA was such a good thing, why did the Government see fit to get rid of it? I will leave that question hanging in the air.

Nick Raynsford: The hon. Gentleman will know that one of the problems with performance management regimes is that they can, over time, become so familiar that there is a danger that the participants learn how to play the system to get high scores, rather than actually improve performance. It is a genuine problem, and that is why a change of regime from time to time is often a good measure to try to ensure that the focus is on raising performance rather than ticking boxes.

Stewart Jackson: This feels like a duet with the right hon. Member for Greenwich and Woolwich. I do not disagree with him on that point, but I am not persuaded that the new post-April 2009 regime is going to address the problem. I will come to that later.
The other key point is the impact on the perception of ratepayers. Of course, I should call them council tax payers nowperhaps I am showing my age, having first been elected to a local council in May 1990, which is almost 20 years ago. Overall across the country, public satisfaction with service delivery has deteriorated. Figures produced by the then Office of the Deputy Prime Minister in 2005 showed that average dissatisfaction with councils overall performance increased by a third over the previous eight years, and that public satisfaction with the overall performance of local government is low compared with most other public service providers and has declined in that time. Satisfaction with the value for money provided by councils has also decreased.
On the specific point that the right hon. Member for Greenwich and Woolwich made, we agree that local councils energy and resources are often diverted away from the delivery of better front-line services and incremental improvements over time because of consideration for ticking a Government box and delivering key performance indicators in a top-down culture. That is a classic example of energy being diverted away from local services to play the system, as can happen with CAAs. That is why we intend to abolish them.
We might be asked, What are you going to do instead? We believe that it is quite permissible for the Audit Commission to have a more proactive role. Instead of a monolithic, top-down approach involving inspecting and analysing everything, with its huge indicative displacement activity costs, it is appropriate for the commission to work with local authorities to focus specifically on high-risk areas more proactively and with greater alacrity.
For example, in the baby P case in Haringey, there was clearly a breakdown in procedures, lack of leadership and so on. That is an extreme example, but the Audit Commission could have had an opportunity to assist. It would not be appropriate in all cases, but we believe that the commission has the skills, knowledge, experience and expertise to deliver in that role. The CAA is also a Government initiative that takes a top-down approach. There may be a degree of consultation now, and it has worked out practically in some local authorities, but it has not been successful in all.
We believe that there is too much inspection and too much focus on meeting Government targets. We also believe that there is no evidence that the plethora of inspection regimes are co-ordinated or working closely together for the benefit of local council tax payers. On that basis, we look forward to hearing what the Minister has to say and we are minded to press the new clause to a Division.

Rosie Winterton: I hope that the Opposition do not press the new clause to a Division, not least because it is defective. Moving sections of the Local Government Act 2003 would have no effect on CAAs, because the legal framework for the CAA is actually in the Local Government and Public Involvement in Health Act 2007. There is a huge problem if the Opposition press the matter to a Division, because it will not achieve what they want.
In particular, section 152 of the 2007 Act clarifies the Audit Commissions existing power to inspect best value authorities compliance with their duties under part 1 of the Local Government Act 1999, and enables the Audit Commission to carry out general inspections of the performance of best value authorities.
The system of assessment for CAA was introduced from April 2009, and replaces CPA and most other rolling programmes of inspection and assessment for local authorities and fire and rescue authorities. But CPA remains relevant to our approach to handling the legacy of freedoms and flexibilities that were awarded according to category of performance under CPA. Removing those legal provisions would be difficult.
Removing section 99 of the 2003 Act would remove the Audit Commission's power to produce reports on the performance of local authorities, and categorise them according to performance. The new clause would remove that power from the Audit Commission. With effect from 1 August 2009, such reports will be undertaken only at the request of the Secretary of State. Section 100 of the 2003 Act provides that the Secretary of State may exercise various powers by reference to local authorities of a particular categorisation, including the power to allow local authorities to trade and to allow freedom from statutory requirements to produce plans or strategies. It would be worrying if that power were also removed, but that would be the effect of the new clause.
We published the consultation paper on 6 May, and we want views on how the freedoms and flexibilities package for local authorities and fire and rescue authorities granted under CPA can be treated under CAA, consistent with the move to providing greater freedom at local level. We are consulting, and there are problems with the new clause, which would not achieve what the Opposition believe it would achieve. In fact, it would achieve the opposite, so I ask the Opposition to withdraw it.

Stewart Jackson: Given the exhaustive legislative context that the right hon. Lady explained to the Committee, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 9

Abolition of national process targets
(1) The Local Government and Public Involvement in Health Act 2007 (c. 28) is amended as follows.
(2) In section 105 insert
(4) All national targets and local improvement targets incorporated within a local area agreement (as defined in section 106(1) or designated under section 109) shall relate solely to the quality and quantity of frontline services within the local authoritys area rather than processes relating to such services..(Mr. Paul Goodman.)

Brought up, and read the First time.

Paul Goodman: I beg to move, That the clause be read a Second time.
It is a pleasure to introduce a clause, the principle of which the Minister will surely support enthusiastically, because there has been agreement throughout the House in recent years that the whole target business has gone too far. If you are ever inclined, Mr. Illsley, to google local councils Government targets and press the button, up will come a whole series of press releases from the Department for Communities and Local Government. I believe that the one I saw was from August last year, and it said that the Government had cut the number of targets from 100 to 35. I would normally presume that the Minister had no difficulty with this helpful new clause that would cut the number of targets even further by relating them to the quality and quantity of front-line services, but the Minister will probably get to her feet and say that our new clause is defective for various legal reasons, and encourage us to withdraw it. However, I encourage her to have a substantive go at the arguments, because there seems to be a consensus across the House that the whole targets business has gone far too far, a point that has been conceded not least by Ministers themselves in recent years and months.

Daniel Rogerson: The new clause tabled by the hon. Member for Wycombe is, on first reading, an attractive proposition, as it seeks to give even greater scope to local authorities to determine how they should be assessed and what their targets should be through the local area agreements. It would effectively focus on outcomes and state that they were important and that local authorities should be able to decide how they would achieve those national targets. So long as the national targets are ticked off and achieved, it is up to local authorities to decide how they will do that, because the process is not important.
However, I have been trying to think of examples of where it is difficult to separate out the process from the outcome, and that is the problem for me. It might be a bit simplistic to say that something is either an outcome or a process, which is my slight concern with the provision, but we certainly support the spirit behind it. The hon. Member for Peterborough referred earlier to the baby P case, and one could argue that sometimes when achieving targets in terms of outcomes, for example with vulnerable or looked-after children, there might be elements of the process in how that is carried out. We probably could not support the new clause as drafted, but it is a useful debate to have.

Rosie Winterton: May I first assure the hon. Member for Peterborough that I will say that his clauses are legally defective only if they are legally defective, because I would not make it up. With regard to the new clause, I think that it is true to say that outcome-based targets are already central to the new performance framework through local area agreements, as was set out in the original local government White Paper of 2006 and subsequently in statutory guidance in 2008.
I am afraid that the new clause would lead to significant disruption to the existing set of local area agreement targets that local partners are now working together to deliver. It would require us to revise all 152 local area agreements, and I think that the impact on the delivery of priority outcomes in local areas would be significant, and certainly not something that local government would welcome, frankly.
We are already working to see how we might strengthen the framework further, including considering the Bichard recommendations on strengthening local area agreements in the national indicator set. So we think that it would be premature and potentially counter-productive to pre-empt that work by making changes such as the one proposed here. I therefore ask the hon. Gentleman to withdraw the motion.

Paul Goodman: The Minister, as she conceded, did not have her battery of legal arguments to hand this time. All that she has told the Committee is that the new clause would cause disruptionas though no change brought in by Ministers over the past 10 years has ever done that. I do not feel that she was at her most persuasive, but I will not press the new clause. We might return to the matter if we get an opportunity on Report and perhaps find a way of couching it so that it would be even less disruptive to local councils. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 10

Payments by parish and community councils
(1) The Local Government Act 1972 (c. 70) is amended as follows.
(2) In section 150, for subsection 5, there is substituted
(5) Every parish or community council must make safe and efficient arrangements for the making of their payments..
(3) In section 246, for subsection 12, there is substituted
(12) Charter trustees must make safe and efficient arrangements for the making of their payments..(Mr. Goodman.)

Brought up, and read the First time.

Paul Goodman: I beg to move, That the clause be read a Second time.

Eric Illsley: With this it will be convenient to discuss the following:
New clause 11Payments by charter trustees
(1) The Charter Trustees Regulations 1996 (SI 1996/263) is amended as follows.
(2) In Regulation 15, for paragraph (2), there is substituted
(2) Charter trustees must make safe and efficient arrangements for the making of their payments..
New clause 12Payments by parish and community councils and charter trustees
(1) The Secretary of State may by regulations prescribe requirements relating to the making of payments by
(a) a parish council, or
(b) charter trustees in England constituted under section 246 of the Local Government Act 1972 or the Charter Trustees Regulations 1996 (SI 1996/263).
(2) The Welsh Ministers may by regulations prescribe requirements relating to the making of payments by
(a) a community council, or
(b) charter trustees in England constituted under section 246 of the Local Government Act 1972 or the Charter Trustees Regulations 1996 (SI 1996/263).
(3) Regulations under this section may make different provisions for different cases.
(4) Regulations under this section must be made by statutory instrument.
(5) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of
(a) either House of Parliament (in the case of regulations under subsection (4)), or
(b) the National Assembly for Wales (in the case of regulations under subsection (5)).
(6) This section comes into force
(a) in relation to England, on such day as the Secretary of State may by order made by statutory instrument appoint;

Paul Goodman: These clauses, as the Minister will well know because the information is in the brief, are strongly supported by the National Association of Local Councils. One might call them the NALC clauses if it were not even more appropriate to call them the 1894 clauses. I shall explain what I mean by that date.
The new clauses relate to payments made by parish and community councils and charter trustees. The point that NALC wishes to make by supporting them is that modernisation is needed in relation to payments. It describes the way in which some councils have to make payments as an anachronism that merits modernisation. It claims that the problem goes all the way back to the Local Government Act 1894, arguing that methods of making payment have not been adequately updated since then, despite the Local Government Act 1933 and the Local Government Act 1972. [Interruption.] There was an echo from a well-informed voice on the other side of the Committeethe right hon. Member for Greenwich and Woolwich may be able to remember that Act better, I am afraid, than I do.
The National Association of Local Councils makes the simple point that, in effect, it believes payment by chequewhich is what I presume was written into the 1894 Actwill be entirely superseded by payment cards and internet banking within eight years. However, under the present legislation, such online payments by the local councils and bodies referred to in the clauses would be unlawful.
Those are the 1894 clauses in a nutshell. There may be reasons why the Minister believes they could be better drafted. NALC, which represents councillors of all sorts of different points of view, including councillors from the Ministers party, says that a serious problem is rumbling along and gathering pace. The way in which payments are made in the modern world is changing and NALC says it will be left exposed legally if it moves to a more up-to-date process than writing cheques. We look forward to hearing the Ministers comments. She may be able to persuade us that the Government are preparing to act on the matter in a different way from that which the new clause proposes.

Daniel Rogerson: The hon. Member for Wycombe has done a good service to the local government community by proposing the new clause. NALC hoped that some of the issues that were originally in the White Paper would be addressed in the Bill; the Bill is of a different nature, so it hoped such matters could be restored to it. Hon. Members have heard me, in previous debates, express my regard for parish councils and their work. Sometimes they are neglected. The proposal would give them greater flexibility as they continue to serve their communities. I hope the Minister will allow this change, which is rather long overdue.

Rosie Winterton: I certainly see that there is a case for reform of the current rules on parish payments, and I agree with many of the points that Opposition Members made. I have had some discussions with my right hon. Friend the Member for Greenwich and Woolwich about the issue because it is something that he feels strongly about, too.
We had some initial discussions that made good progress. I assure the Committee that we will continue those discussions, so that we have a properly worked out plan for change. We will also look for an opportunity in the legislative programme to put that change on a firm foundation, which I hope will receive support from all parties.
We want further discussions about the issue. However, as I have said, I will certainly give a commitment that we will look for an appropriate legislative vehicle to make some of the changes. Having said that, I hope that the hon. Member for Wycombe will withdraw the new clause.

Paul Goodman: It is obviously not for the official Opposition to pre-empt whatever NALC may think. However, having heard what the Minister has said, I imagine that it will find her remarks reassuring. Therefore, we will not seek to press the new clause to a vote and I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 16

Abolition of the Standards Board for England and the Adjudication Panel for England
(1) The Standards Board for England and the Adjudication Panel for England shall be abolished.
(2) Sections 57, 57D, 58, 59, 60, 61, 62, 63, 64, 65, 65A, 66A, 66B, 66C, 67(1), 75(1), (3), (4), (7), (9), (11), 78A, 78B and Schedule 4 of the Local Government Act 2000 (c. 22) shall cease to have effect.
(3) The Secretary of State may also by order make transitional or consequential provisions (including by amendment of the Local Government Act 2000) as are necessary due to the abolition of the Standards Board for England and the Adjudication Panel for England.
(4) Any order under subsection (3) must be made by statutory instrument.
(5) A statutory instrument containing an order under this section may not be made unless a draft of the instrument has been laid before, and approve by a resolution of, each House of Parliament..(Mr. Goodman.)

Brought up, and read the First time.

Paul Goodman: I beg to move, That the clause be read a Second time.
We now turn to the standards board. It is perhaps worth saying at the start

Eric Illsley: Order. I just want to make an announcement: members of the public are not allowed to take documents from the table. Those documents are for the members of the Committee. Members of the public are not allowed to come behind the bar. Thank you.

Paul Goodman: As I was saying, we now turn to the Standards Board. We have reflected on the history of the board for the past 10 years or so, since it was introduced, and we have come to the conclusion that it is a classic illustration of the law of unintended consequences. No reasonable person could object to the idea that we should seek to ensure that local councillors conduct their work according to proper standards. However, in these matters there is always a danger that the law of unintended consequences applies and we think that has been proven in this case. Labour Members ought to consider that point very carefully if anyone anywhere proposes in any way to apply a similar principle and a similar framework to Members of Parliament.
Let me explain what I mean by the law of unintended consequences. If a process is established whereby a board is set up to receive complaints but it happens that under data protection rules, the names of the people making the complaints cannot be published, the Government are potentially setting up a considerable problem for local councillors. I suspect that there will not be a Member of Parliament in this Committee this afternoon who has not received a complaint from a councillorprobably a councillor from their own political party but possibly notabout a case in which that councillor has been reported to the Standards Board. The councillor does not necessarily know the name of the person who submitted the complaint. It is certainly the case with complaints that have been made to me that the councillor was not even aware of the charges that had been brought against them, which is surely contrary to natural justice. The process then flows on.
Rather than presenting the Committee with statistics about the small percentage of complaints that have been upheld, I seek to draw its attention to research that has been done by the university of Aberystwyth and others that points to the difficulty that parish, town and community councils have in attracting sufficient candidates. Obviously the existence of the Standards Board will not be the only reason why people do not come forward as candidates for those councils. However, given that such a large proportion of the complaints are about parish councillors and other councillors who operate at that level, the standards board regime, which is of the nature that I have just described, must have an effect on the number of people, and perhaps on the quality of people, who wish to come forward; the university of Aberystwyth certainly thinks that it does. I urge Ministers and other Labour Members to consider whether there would be a similar effect on Members of Parliament were a similar regime introduced at Westminster.

Nick Raynsford: The hon. Gentleman has not addressed the crucial issue, which is the impact that the Standards Board may or may not have had on standards of conduct in local government. He will be aware that at the time it was established there was widespread concern about inappropriate behaviour. As an illustrationit is a good news storyI was judging the Local Government Chronicle awards for governance and standards in local government recently, and I saw a presentation from an authority that began with an image of a police van with a caption that read:
That was our former leader being taken away.
I tell the story because that local authority went through a traumatic process because of that particular incident but subsequently improved its governance and standards, as have many others. I believe that the existence of a Standards Board has been an important influence. I hope that the hon. Gentleman, rather than talking about peripheral consequences, focuses on the crucial issue of the impact of the Standards Board in helping to drive a culture of high standards in local government.

Paul Goodman: I think that people not coming forward to stand for local government is not a peripheral consequence. I concede to the right hon. Gentleman that if such a frameworkone of his favourite wordswas implemented there would be some good consequences. The problem is that there would also be some bad ones. The question is whether the bad ones outweigh the good. The bad ones outweigh the good for people who are not coming forward and for councillors who have an accusation made against them without knowing the nature of the complaint. Is it necessary to drive up standards of behaviour among councillors by installing the framework in the first place? The right hon. Gentlemans answer is yes, our answer is no. If local councils are given more power and responsibility, standards will rise. There are other ways, to which I shall refer, of ensuring that councillors observe proper conduct, and that will happen naturally.
This morning, in reference to an earlier debate, the right hon. Gentleman claimed that there was no essential difference between my right hon. Friend the Member for Skipton and Ripon and himselfthat both right hon. Gentlemen were content for the guiding hand of Government to apply. I put it to the right hon. Member for Greenwich and Woolwich that there is still an essential difference represented in our current discussion. It is true that occasionally my right hon. Friend feels the odd Stalinist twitch; he was a Minister and he will get to his feet and, such is his open and honest nature, he will put his view. In the case of the right hon. Gentleman, who also has an open and honest naturehe is very obligingwhen he does not agree with what his Front Bench colleagues say, as with the petition clauses, he is a bit more discreet than my right hon. Friend, who naturally wants to share his views with the Committee.

David Curry: I am leaving voluntarily, I assure you.

Paul Goodman: Perhaps that explains the nature of much of our debate over the past few days. Before I wander too far from the Standards Board, I say to the right hon. Member for Greenwich and Woolwich that there are other means of ensuring that councillors observe standards than inventing this new bureaucracy, putting it into effect and leaving it to the law of unintended consequences

David Curry: It is possible for both parties to be right in an argument. The right hon. Member for Greenwich and Woolwich makes a good point in saying that we need to drive up standards. It is also the case that many of us will know extremely good councillors who have been subject to what are quite frankly malicious complaints and have had cases drag on for months, destabilising their work and causing them a huge amount of personal and emotional difficulty; it is a question of balance.

Paul Goodman: That is right. It is about whether the good outweighs the bad. Looking at the Standards Board as a whole, I am willing to concede to the right hon. Member for Greenwich and Woolwich and say that it has some of the effects that he has described. It also has the effect that my right hon. Friend described and which many members of the Committee will have experienced at first hand.

Stewart Jackson: Speaking from eight years experience as a London borough councillor, another result of the imposition of the Standards Board is that it has corroded the relationship between professional officers and councillors, particularly in respect of complaints about councillors. It has also entrenched an inequality, because for quite minor, vexatious reasons, such as getting into an argument with an officer, which 10 years ago would have been put down to experiencethose involved would have shaken handspeople can now end up in front of the Standards Board, whereas such behaviour from officers is not necessarily subject to such a recourse.

Paul Goodman: My hon. Friend is showing me up, because I have not had the experience, as he has, of being a local councillor. Naturally, I maintain close relations with councillors in my constituency, several of whom have complained to me about the Standards Board and related stories not dissimilar to the one related by my right hon. Friend the Member for Skipton and Ripon a moment ago. My hon. Friend is right.
A framework is in place already, as the right hon. Member for Greenwich and Woolwich said. District auditors are responsible for investigating financial impropriety, the police are there for criminal cases and the courts deal with civil cases. In the balance of things, the Standards Board has not been a force for good. We will listen carefully to what the Minister says, but on balance we are prepared, if necessary, to press the amendment to a vote.

Rosie Winterton: As the hon. Member for Wycombe said, the amendment would abolish the Standards Board for England. My right hon. Friend the Member for Greenwich and Woolwich made an important point that I think the hon. Gentleman accepted: local authority standards committees look to the Standards Board for advice and guidance, training and direction. They would be cut adrift if the Standards Board were abolished.
The Standards Board was established in 2001 as the body responsible for investigating alleged misconduct by councillors. In 2008 we devolved the conduct regime for local authority members to local authorities. The local authorities are best placed to ensure that their members meet the high standards of conduct, which those who voted for them rightly and reasonably expect.
When the regime was devolved, the role of the Standards Board for England was changed to that of a strategic regulator for local authority standards committees, providing those committees and local authority officers with the tools, training and guidance that they need to enforce the often robust conduct regime in local authorities. The Standards Board is an indispensable part of the conduct regime for local authority members, in respect of the relationship between the central advice, guidance, and so on, and how the local authorities carry out their functions.
The Standards Board also monitors the performance of local authority standards committees. If it believes that a local authority regime is failing or if it is invited in by a local authority, it has the power to assume the business of that local authoritys standards committee until it is put back on track.
The Standards Board can also investigate the most serious allegations of breaches of the conduct regime, and it has accumulated a wealth of experience and expertise in investigating very complex cases. Sometimes local authorities prefer to refer cases to the Standards Board either because of their complexity or because the issues involved mean that local investigation would not be the preferred option.
The new clause would also abolish the adjudication panel for England, which performs two important functions. First, it is where the most serious findings of a breach of the code of conduct by a councillor are referred for a determination of sanction by the Standards Board. The adjudication panel has the power to determine a suitable sanction, from censure to the suspension of a councillor from office for up to five years. We do not consider it appropriate that a local authority standards committee has such power of censure, although they may suspend a councillor for up to six months. It is not right for one local authority to ban a person from becoming a member of any other local authority for up to five years. Secondly, the adjudication panel is the body to which a councillor may appeal if he or she considers the finding of their own local authority standards committee to be unfair.
I should like to take this opportunity to clarify an issue that occupied several hon. Members on Second Reading, which is the issue of predisposition, predetermination and bias, particularly in planning. When we revised the code of conduct for councillors into its current form in 2007, one of the major issues that we successfully addressed was ensuring that councillors with a personal or even a prejudicial interest in an issue are still able to represent the views of their constituents, even if, in cases in which there is a prejudicial interest, they are unable to vote on the matter.
Furthermore, the Standards Board has issued very clear guidance on predisposition, predetermination and bias and the code of conduct. The conduct regime recognises that it is quite proper for a councillor to show predisposition; indeed, a councillor may be elected because of his or her opposition to, or support for, a single issue. However, there is a world of difference between predisposition and predetermination.
A councillor should have an open mind to the merits of an argument before making their final decision at the council meeting. In matters of planning, that can be particularly sensitive, but the guidance issued by the Standards Board is clear. Councillors can involve themselves in discussions with developers, their constituents and others about planning matters. Their ability to do that is greatly enhanced, and their position protected, if they adopt the general hints suggested by the Standards Board. The Standards Board also provides training material on its website for local authorities that wish to address the issue of councillors and planning and the conduct regime. That is the Standards Board fulfilling its function as a strategic regulator. I understand that that was a matter that was debated on Second Reading, and it is important to clarify the position.

Daniel Rogerson: The Minister has explained in detail particular sensitivities around planning. One thing has emerged in recent years since the change in advice to local authority members on what they can and cannot say in public prior to the determination. Although it is entirely justified to say that someone should not take a decision before they have seen all the evidence at a meeting, the problem is that they are not even allowed to express an opinion about how they are feeling at the time, prior to seeing any other evidence. In most decision processes, we might be of an opinion, we are able to express that opinion and we retain the freedom to change our mind when all the facts are put in front of us. I am sure the Minister has done that in Committee, not this one perhaps, but in other Committees. She sees what I am trying to say. That is the problem. People are not able to express any opinions in public prior to determination in committee.

Rosie Winterton: I hope that what I said clarifies everything in terms of predisposition, predetermination and opinions.
The Standards Board and the adjudication panel, particularly in the light of changes that have occurred recently, are an important tool to ensure that local authorities have support in what they try to carry out in terms of conduct of members. I hope that the hon. Gentleman will withdraw his new clause.

Paul Goodman: What the Minister had to say about predetermination and predisposition was so interesting it almost took my mind off the broader issue of the Standards Board. In plain English, what she was saying was that predisposition was basically fine, but one must not reach a definite judgment or a predetermination, or a prejudgment. I am sorry to stumble over my words, but it is hard to represent accurately in plain English what emerges so beautifully from seamless civil service prose.
To return to the new clause, no doubt there is a danger of the official Opposition getting into a bad habit of not pressing new clauses to the vote, just as there can be a danger of getting into a habit of calling Divisions. [Interruption.] I just wanted to see whether Members were still awake. On this occasion we will not press our new clause to a vote. We reserve the right to return to the matter on Report. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 17

Building targets
No local authority which has a responsibility to plan for building a target number of homes may seek to meet its target by applying for planning permission in the area of another local authority..(Mr. Lilley.)

Brought up, and read the First time.

Peter Lilley: I beg to move, That the clause be read a Second time.
The Committee will know that I have a specific constituency interest that causes me to table this new clause. I have been remiss in not drawing attention to an entry in the Register of Members Interests. I am a director of a company that supplies software and services to local government, among other things. As far as I am aware, nothing I have said and nothing I will say has any bearing on its business or was influenced by it. For the sake of propriety, I should put it on the record that I am a director of that company.
My constituency interest is a specific issue that I believe has general implications for every member of the Committee and every Member of the House of Commons, and that is highly relevant to the desirable aims of the Bill. Let me outline the specific case. The Milton Keynes and south midlands spatial strategy covers a region, as its name suggests, from Milton Keynes down to Luton and Bedfordshire, but not Hertfordshire. A consultation was carried out on that spatial strategy throughout the area of the south midlands, but not in Hertfordshire. No one in Hertfordshire was consulted.
After agreement on that was reached, preferred options were drawn up for building homes, all of them initially within the area of the south midlands, Luton and south Bedfordshire, including a number of locations west of Luton. None of the initial preferred options was in Hertfordshire. Of course, once indications of the likely preferred options had been made public, local opposition arose in the west and the south of Luton.
Councillors looked around for something else to do that would avoid opposition. They discovered a loophole in the law, which would enable them to propose a preferred option not in their own spatial area, but in north Hertfordshirein Lilley Bottom, which has caused some amusement to the Committee already. It is a particularly beautiful area of my constituency.
The residents of Luton and south Bedfordshire were consulted about that, but not those of Hertfordshire until there were protests, after which some mock consultation was held in my area. There were even discussions between Luton borough council, the council in south Bedfordshire, the Department for Communities and Local Government and the developer, Bloor Homes, about how they would go about building in my constituency, but with no representation from north Hertfordshire or Hertfordshire county council at that meeting. Then, a preferred options summary document was published.
I am grateful to a constituent of mine, Mr. Christopher Whetnall, who has done a thorough analysis of the matter. He discovered that in that document assertions were repeatedly made such as that the
strategic urban extension to the east of the main conurbation
the extension of Luton into north Hertfordshire
will also be planned for... by North Hertfordshire District Council.
But North Hertfordshire district council denies that absolutelyit is completely opposed to the proposal and has no intention to plan for it. However, in several places in the document issued by Luton and south Bedfordshire, it is stated that it is intending to do so.
The document drawn up for the spatial strategy looks at designating areas as green belts and areas of local natural beauty and specific landscape value, but only in their areas. When a map was published of where it was intended to build, including areas of north Hertfordshire, it was not shown as green belt, let alone an area of great local natural beauty. The councillors own consultants said critically:
Given the high sensitivity of this landscape
the landscape in Lilley Bottom
development is not recommended.
They none the less ploughed ahead because they were proposing to build in an area where it does not matter what the local residents think, as they are not able to vote for or against the councillors in Luton or south Bedfordshire.
Imagine the sense of outrage and incomprehension among my constituents that that is remotely possible. Indeed, I invite hon. Members to imagine that sense if such a proposal were to affect their constituencies, with a neighbouring council proposing to build in their area without proper consultation, any representation or any responsibility for the feelings of those most directly affected.
That raises general issues. There is manifestly a loophole in the law. Parliament did not sit around and think, We should allow one council to propose meeting its housing targets by building in the area of another. We did not rule it out simply because we did not think it would ever happen. It is a loophole that needs to be closed. It is also wholly contrary to the spirit of the Bill.
I have not welcomed large chunks of the Bill, but the spirit of itto encourage local democracyis one that can flourish only if the local representatives are accountable to those whose interests they serve and affect. If they are serving one lot of residents by affecting those in another area who are unable to vote for or against them, that is the antithesis of democracyone cannot have democracy without accountability. I therefore urge members of the Committee to consider the proposal favourably. It would simply close the loophole that exists unintentionally in the planning laws before it affects their constituencies.
If hon. Members fail to close the loophole and the same thing happens to them, they will rue the day. When I raised the matter on Second Reading, it was clear that other councils were beginning to get wind of it and the same sort of thing was being mooted, considered or pursued actively in other areas of the country.
A counter-argument was put by the hon. Member for Luton, North (Kelvin Hopkins). Needless to say, his constituency does not abut mine. Mine abuts Luton, South. He said that it was impossible to build in the Luton area and meet its target, and that building should be allowed elsewhere. The housing targets set for each area are a reflection not only of the needs of the residents, but of the scope for building in the area. If that is not the case, it ought to be.
A council should be set only a target that is realistic, given the amount of unbuilt area or scope for infill development. It is clear that housing could have been built in the area because sites within it were identified initially that could take the required number of houses to be built. Indeed, there is a further site south-west of Luton where a developer has a plan to build. He has protested that he cannot get proper consideration by Luton and south Bedfordshire because they want go ahead and build in Hertfordshire, and not even consider what he is proposing.
Well, I am not proposing the reverse of what Luton is doing to me and saying that it is the right area. I am not an elected representative for Luton or south Bedfordshire. I leave it to them to decide the least bad areas in their districts in which to build houses, but they certainly ought to consider proposals that affect their own areas before they even dream of predatory development in other council areas.
The second argument put by the hon. Member for Luton, North is that Luton is an urban area that ought to be allowed to expand, and that there were economies of scale so that it should have planning power over the peripheral areas. That might be the case, but it does not have such responsibility. Its boundaries have not been increased. If it wants to bring about a change in its boundaries, it should seek to do so through whatever procedures exist for changing local government boundaries. It should not try to use a loophole in the law to get round this. So far, Parliament has not decided that Luton ought to be an area of massive expansion and given free rein and jurisdiction over a wider area than it already has responsibility for.
The third argument is that matters still depend on the planning authorities. Luton and its chosen developers can make an application to build many thousands of houses in Lilley Bottom, but that will have to be considered by the planning authority, which is North Hertfordshire district council. It has been somewhat constrained in what it can say for the very reasons that we discussed in the debate on the previous clause, but it has made matters absolutely clear. I predict that it will turn the application down. If Luton chooses to persist, the matter will go to a planning inquiry and a planning inspector will be faced with something that is designated by a local authority that has some presumption in its favournot, admittedly, the local authority in which the location resides, but it seems unfair that that should be the case.
Whereas I by no means think that the outcome is a foregone conclusion, I shall fight tooth and nail during the initial planning process in north Hertfordshire, and if it goes to a planning inquiry, I shall say that that is absolutely the wrong area in which to build extra houses. Even if the target for house building in north Hertfordshire were to be raised and some of the target from Luton transferred to north Hertfordshire, we would not build there because it is a particularly beautiful area of green belt. It provides an area that is of great benefit to the residents of Luton and Hitchin, which they value. One thing that the residents of Hitchin and Luton have in common is that they want to remain separate from each other.
I urge the Minister to look at the new clause positively. I have raised this issue in our debates on a number of clauses, where appropriate, but so far no hon. Member has sought to defend the loophole. If it is not closed, the process may proliferate nationwide. It is clearly absurd that, in extremis, north Hertfordshire could meet its housing target by proposing to build in Northumberland. I frequently get letters from my constituents asking, Why are we building in Hertfordshire, which is already the most densely populated county in the country, when we should be building in less populated areas in the north? The same could apply to Cornwall. The hon. Members for North Cornwall and for Falmouth and Camborne will be relieved to know that my constituents do not mention Cornwall, but it might occur to them.
Surely, we will end up with anarchy. One thing that the Bill seeks to do is to promote orderly co-operation between councils, rather than conflict and disputes. The new clause would prevent such conflict and dispute by removing the loophole. I hope that the Minister will reflect the undoubted will of the whole Committee that the loophole should be closed. If there are any legal uncertainties about it, we can always revise it on Report.

Nick Raynsford: I shall be brief, but I shall disappoint the right hon. Member for Hitchin and Harpenden by saying that I hope that the Minister will not accept the new clause, which is misconceived and inappropriate.
I shall not talk about the individual circumstances in the right hon. Gentlemans constituency, and I have no reason to dispute his concern about them, but I note the tone of hostility to housing development that one has grown accustomed to hearing from many Conservative quarters. I reflect only on the fact that we have a serious housing shortage and that if we are not serious about providing new housing to meet peoples needs, we will continue to face serious problems of homelessness and people living in squalid conditions, which is not acceptable in a modern society.
I object to the new clause because it is prescriptive and because it would prohibit the very co-operation between local authorities that the right hon. Gentleman says he wants to encourage. It is clearly inappropriate to prevent one local authority, with the agreement of another, from doing a housing development that crosses the border between the two. I represent a constituency in a fairly densely occupied urban area where we have housing developments that cross borders. Indeed, people are sometimes confused as to whether they are renting from Lewisham or Greenwich council. It would be absurd to say that there could not be an agreement whereby a development done by one of those councils impinged in some way on the others area.
I am also conscious of the efforts that have been made to help people to move to other areas through new towns and other provision in seaside locations to which elderly people can retire. Prohibiting such provision would be completely inappropriate. Of course, we want co-operation.

Peter Lilley: The right hon. Gentleman makes a valid point. If he will support my new clause now, I will support further modification on Report saying, Except by agreement of the councils concerned.

Nick Raynsford: If the right hon. Gentleman tables such an amendment on Report, I will consider it a lot more sympathetically, but I could not possibly support the new clause now because I regard it as inappropriate for the reasons I have explained.

Daniel Rogerson: I have a great deal of sympathy for what the right hon. Member for Hitchin and Harpenden says about his constituents. They must be mystified that such a planning process can be under way for the area where they live, and that decisions are being taken over well-established borders. That is a real problem. I accept the point that the right hon. Member for Greenwich and Woolwich made, because, as we have discussed, local authorities should be able to come together and present solutions, so perhaps the measure is not quite right. We are certainly sympathetic to the views expressed by the right hon. Member for Hitchin and Harpenden, and I am sure that his constituents would expect better from the planning process.
I spent several years living in the borough of Bedfordnot quite Lutonand my wife taught very close to Hitchin in a place called Stotfold, just over the border in Bedfordshire. I know the area quite well and I am sure that residents have more in common than the right hon. Gentleman implied, even in Hertfordshire. I am sure, too, that they get on far better than was suggested. Issues such as this do not help the process, so if we can resolve it in some way, all to the good.

Rosie Winterton: I want to start by saying that it is difficult to comment on the proposals that the right hon. Member for Hitchin and Harpenden referred to, because I understand that the respective local authorities are still at the stage of making proposals that have yet to be tested by inspectors. I support all the comments made by my right hon. Friend the Member for Greenwich and Woolwich, and I want to reassure the right hon. Gentleman that, as my right hon. Friend the Member for Wentworth said on Second Reading, it is not the loophole that he talks about.
Local authorities have no powers to require another local authority to accommodate housing numbers that have been allocated to them. As I have said, our policy is that local authorities should accommodate the level of housing identified for their area in the regional strategy. We support councils working together, even to the extent of preparing joint plans and initiatives, so that they decide between them how best to accommodate their respective housing needs across a sub-regional area. But they cannot simply require another local authority to accommodate the numbers of houses that have been allocated to them. Where local authorities disagree, there is a role for an independent inspector to make a decision on their proposals, based on the evidence available and policy set out in the regional strategy and by the Government. The proposed new clause is unnecessary and I urge the right hon. Gentleman to withdraw it.

Peter Lilley: The point is not that I am saying one council can require another. Councils can make an applicationthey should not be allowed tofor planning and that will then have their endorsement when it goes to an inspector. What I would like is an assurance that if they did go ahead with any such proposal, and it was granted, the houses that they built in another district area would not count towards their target, which has been set for their area. The Minister did not make that clear.

Rosie Winterton: As I have said, the point of the amendment would, as my right hon. Friend the Member for Greenwich and Woolwich said, prevent authorities joining together, but they cannot simply require another authority to build in their area. I suggest I look at the record relating to the question that the right hon. Gentleman asked and I will write to him to clarify the position.

Peter Lilley: Can I not bring it back on Report now?

Eric Illsley: Voting on a new clause and an amendment in Committee does not prevent the same clause or amendment being re-tabled on Report. But when Mr. Speaker selects amendments on Report, the amount of time given to the clause or the amendment in Committee will be taken into account. For example, if the Committee had had quite a substantial debate on an amendment or a new clause, that would be taken into account by Mr. Speaker, who might judge that sufficient debate had been had on that particular section of the Bill. Voting on it now is not an absolute bar to raising the new clause on Report, but it may be advantageous not to vote now as it could allow more time for it on Report. It is entirely up to the hon. Gentleman. That is not particularly good guidance, but this is an awkward situation.

Peter Lilley: It is extremely valuable guidance. After 25 years in the House, it is the first time that I have proposed a new clause in Committee, other than a Government new clause. I shall therefore follow your advice, Mr. Illsley, and not press the new clause to a vote. I shall table a similar clause on Report, but one that meets the objections that have been expressed today. I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 20

Local freedoms
(1) The Local Government Act 1972 (c. 70) is amended as follows.
(2) In section 248 (freemen and inhabitants of existing boroughs), after subsection (1) there is inserted
(1A) Where the son of a freeman of a city or town may claim to be admitted as a freeman of that place, the daughter of a freeman may likewise claim to be so admitted.
(1B) The son or daughter of a freeman of a city or town shall be admitted as a freeman whether born before or after the admission, as a freeman, of his or her freeman parent and wherever he or she was born.
(1C) In subsections (1A) and (1B) freeman excludes a freeman of the City of London..(Dan Rogerson.)

Brought up, and read the First time.

Daniel Rogerson: I beg to move, That the clause be read a Second time.
The new clause was tabled by the hon. Member for Newcastle upon Tyne, Central (Jim Cousins), who is not a member of the Committee. I was contacted this morning by Newcastle city council and told that councillors wished to raise a crucial question by way of this new clause. Current legal provisions allow for certain rights to be passed on to male children but not female children. The new clause also draws attention to the fact that it matters whether those children were born prior to someone becoming a freeman or after. The council says that those are crucial questions of equality. I am happy to raise them today, as this may be the only opportunity to do so in the foreseeable future.
Something in the new clause struck me as interesting. I am not familiar with such arrangements, not having spent a great deal of my life in cities, but these rights seem to be hereditary. I am used to things such as the honorary freedom of a borough, which is usually given to regiments or RAF squadrons and certain notable individuals who have made a big contribution to the community. We spoke about honorary positions earlier, but did not dwell on them. We passed over the matter.
I am keen to discover why those offices are hereditary, as society seems to have moved away from such things. Indeed, I hope that we will soon move away from that in the other place. I want to know what the law is, and why it might be a problem in places such as Newcastle. I note that the hon. Member in whose name the new clause is tabled is a Newcastle Member.

Eric Illsley: Before I call the Minister, I shall give a little background on why the new clause appears where it does.
I understand that Newcastle city council wanted this matter to be debated, and approached the Member of Parliament in whose name the new clause was tabled. However, it was too late to be considered as an amendment to clause 27, which would have been appropriate. In order to have the matter debated, the hon. Member for Newcastle upon Tyne, Central (Jim Cousins) tabled it as a new clause. The advice that I gave to the right hon. Member for Hitchin and Harpenden applies here as well. I ask the Committee to tread carefully in case the hon. Gentleman wishes to table the same amendment on Report, so that he can have the opportunity to speak on behalf of his constituency.

Rosie Winterton: I very much hope that the hon. Member for North Cornwall welcomes clause 27, which was introduced in the other place by Lord Graham. In our view, it meets the aims of the new clause in a more sustainable way. I shall give a bit of background, by way of diversion. If the hon. Member for North Cornwall has any other questions, he can write to me.

Daniel Rogerson: If we can return to this matter on Report, and if the Minister is keen to explore it in the future, we could correspond, rather than further delay the Committee.

Rosie Winterton: As I said, I understand that the new clauses aims were met by clause 27, so perhaps the hon. Gentleman

Eric Illsley: Order. I apologise for interrupting the debate, but I want to make it clear that it will not be within my gift to decide what is selected on Report. I would not want to curtail or stifle debate here, if Members wish to debate the new clause.

Rosie Winterton: Perhaps a discussion between the hon. Member for North Cornwall and my hon. Friend the Member for Newcastle upon Tyne, Central would be helpful, because I am advised that clause 27 meets many of the new clauses aims andcruciallyin a more sustainable way. I know that he likes that word.

Daniel Rogerson: On the basis of that consultation with other hon. Members, I beg to ask leave to withdraw the new clause.

Clause, by leave, withdrawn.

New Clause 21

Conditional payment provisions: insolvency of a third party payer
In the Housing Grants, Construction and Regeneration Act 1996, section 113 prohibition of conditional payment provisions, omit the following
(a) in subsection (1) unless that third person, or any other person payment by whom is under the contract (directly or indirectly) a condition of payment by that third person, is insolvent, and
(b) subsection (2), and
(c) subsection (3), and
(d) subsection (4), and
(e) subsection (5)..(Dan Rogerson.)

Brought up, and read the First time.

Daniel Rogerson: I beg to move, That the clause be read a Second time.
Again, I shall not detain the Committee for too long. The hon. Member for Peterborough raised the issues covered by new clause 22, which would protect those at the end of the chain who carry out work on a construction project. It would try to prevent contractors higher up the money-supply chain from withholding payment because of an insolvency somewhere along that chainin particular, at the top of it. As he has raised this issue already, I shall merely say that that problem remains to be resolved.

Sarah McCarthy-Fry: We return to the point raised by the hon. Member for Peterborough. The new clause would protect firms from the effects of insolvency elsewhere in the supply chain, which is, of course, a laudable aim. However, we must ensure that, when trying to protect some businesses, we do not disadvantage others. That would be the case in the construction industry as in any other. Of course, the construction industry is facing difficulties in the economic downturn, but so are other sectors.
The new clause suggests that we delete the insolvency exception to the prohibition of the pay when paid clauses. The construction industry is unique in that such clauses are prohibited by statute, and that exception is in place for a good reason. It continues to allow construction firms the same protection from the risks of an insolvency as businesses in other industries. It is important to maintain that level playing field. We need to be careful that we do not create a situation for construction insolvencies different from that for other businesses. Preventing construction firms from using pay when paid clauses in insolvency situations would do that.
We have consulted the industry extensively on whether a better solution could be found than the compromise one in the Housing Grants, Construction and Regeneration Act 1996a solution that would deliver a fairer result for allbut no clear evidence was found that the removal of the current insolvency exception would achieve that. In those circumstances, the sensible option is to maintain the status quo. I therefore ask the hon. Gentleman to withdraw his new clause.

Daniel Rogerson: I merely note that the type of people at the end of the chainthe smaller contractorsare probably more exposed and at risk than some of the larger businesses higher up. That is the potential problem. Larger businesses may well be able to look at the finances and absorb costs in a different way from some of the small contractors at the bottom of the chain. For that reason, they deserve a little more protection than they are currently afforded, so I shall press the clause to a vote.

Question put, That the clause be read a Second time:

The Committee divided: Ayes 6, Noes 8.

Question accordingly negatived.

Ordered,
That certain written evidence already reported to the House be appended to the proceedings of the Committee.(Ms Rosie Winterton.)

Question proposed, That the Chairman do report the Bill, as amended, to the House.

Rosie Winterton: May I take this opportunity, Mr. Illsley, to thank you and Mr. Amess for conducting proceedings in Committee with firmness but fairness and allowing a wide-ranging and probing debate. I also thank the Clerk of the Committee, the Hansard reporters, the policemen, the attendants and those who have witnessed our proceedingson some occasions, I know, spellbound by the quality of the debate. I also thank my officials from the Department for doing an excellent job in briefing two fairly new Ministers and, I hope, in being helpful to other Committee members where necessary.
I thank all members of the Committee, but particularly the Government Whip, who has done an excellent job keeping us in order, and my hon. Friend the Exchequer Secretary, who has stayed with us right until the end. I want to say what a pleasure it has been working with heralbeit for a rather shorter time than we perhaps had in mind last week. There has been a great deal of expertise on the Committee. We have been lucky to have a number of right hon. and hon. Members who have either direct local government experience or experience as Local Government Ministers. That has helped us to give proper scrutiny to the Bill.
As well as thanking Labour Members, I want to thank the Opposition Front Benchers for their probing amendments and debate. In the end, we have a very good Bill that will empower people to shape their local communities, help local and regional economies through the immediate difficulties and create robust local, regional and national economies for the future. Thank you, Mr. Illsley. I support the proposal to report the Bill to the House.

Paul Goodman: It would be wrong of the official Opposition not to thank you, Mr. Illsley, and Mr. Amess for the way in which you have chaired proceedings. We hope that you have enjoyed them as much as the rest of us. It has been a somewhat uncertain process: we have not always been certain at what time we will start on Tuesday mornings; we have not always been certain whether Ministers and Government Members would be able to make use of the lift, but they have somehow managed; and we have not always been certain which Minister we would find here.
The new Exchequer Secretary must wake up each morning wondering which Ministry she is in. The logical destination for her is the Foreign Office, so that she can wake up wondering which country she is inlike some former American Presidents. I thank the Minister for Regional Economic Development and Co-ordination for the way in which she has conducted herself during the proceedings. She has felt her way into the Bill. We obviously do not think as much of it as she does, and we will return to that theme on Report.
We have enjoyed the contributions from the Liberal Democrats, with whom we found we agreed on many occasions, although not always. We thank the police and other attendants.
I close by thanking those two stalwarts of the Committee, my right hon. Friend the Member for Skipton and Ripon and the right hon. Member for Greenwich and Woolwich.

David Curry: The mastodons done good!

Paul Goodman: It has been an education and a pleasure listening to the mastodons on occasion. Without meaning to be impertinent, but perhaps being a little less serious, if I were to wake up in the morning and find myself reading in the public print that the two intended to contract a civil partnership, I would not be altogether surprised, although I would be surprised not to have received an invitation.

Julia Goldsworthy: It has been a pleasure to serve under your chairmanship, Mr. Illsley, and that of Mr. Amess.
On behalf of myself and my hon. Friend the Member for North Cornwall, I thank the Ministers for taking on the brief so quickly and for handing it on in the process of debating the Bill. I wonder whether there will be any changes in the Ministers on Report. Who knows? I thank the officials for giving the Ministers such inspiration so rapidly and for responding to many of the queries that we raised.
We pay tribute to the other hon. Members to whom we have had the opportunity to listen. The hon. Member for Wycombe said that we agreed in most part. However, at no point did my hon. Friend the Member for North Cornwall or I feel the need to confess to or suppress any Stalinist urges. We would perhaps be better characterised by our Penhaligon roots in our campaigning for Cornwall and the power of the people.
We have had the opportunity to debate some of the many and varied issues raised by the Bill. Some of our concerns have been satisfied, but there is plenty of meat still to debate on Report.

Eric Illsley: I thank hon. Members for their comments, which I will relate to my co-Chairman. I add my thanks to the Clerk, the Hansard reporters, the attendants and the police for their assistance to me.

Question put and agreed to.

Bill, as amended, accordingly to be reported.

Committee rose.